The 2008 Reform of Special Public Pension Regimes in France

We propose a quantitative analysis of the reform of a special public pension regime, that of the Paris Metro transportation workers, which took place at the end of 2007 and became effective in 2008. We focus on the case of train drivers. To assess the reform, we advocate the use of a criterion: the expected present real net cost, per year of service, which is the expected, discounted sum of net real wages and pension benefits earned by a worker over his entire life cycle, to take the social cost of public pensions into account. The provisions introduced by the reform should save some public funds, once the permanent regime is reached, but in the long run. Before the permanent regime is reached, a long transitory period will hold and lead to an increase in the public costs. This transitory regime is likely to end up with larger State subsidies to the special pension scheme. The reform can be interpreted as a deal between the public authorities and the insiders at the expense of the new recruits. The “right” to reform was “bought” from the unions at the cost of a substantial amount of grandfathering. Having examined the publicly available data, we argue that a reform, preserving the public budget from an outright increase in social costs could have been technically feasible and politically acceptable.